Private sector lender Axis Bank said it has incorporated a subsidiary A.Treds Ltd to operate Trade Receivables Discounting System (TReDS), which will help in improving flow of funds to SMEs.

In November last year, the RBI had given in-principle approval to three entities to set up TReDs. The other two entities are — Mynd Solutions (Gurgaon) and NSE Strategic Investment Corporation and Small Industries Development Bank of India (Mumbai).

Axis Bank in a regulatory filing said that A.Treds is registered with the Ministry of Corporate Affairs, Registrar of Companies.

“The Company is incorporated as a Subsidiary Company of the Bank. A.Treds Limited will inter-alia be engaged to undertake the business of setting up and operating a Trade Receivables Discounting System, as per the in-principal approval received from the Reserve Bank of India,” the filing said.

Finance Minister Arun Jaitley, in his Budget 2015-16 Speech, had highlighted the need for TReDS for improving flow of funds to MSME sector by reducing the receivables realisation cycles.

TReDS will allow SMEs to post their receivables on the system and get them financed. This will not only give them greater access to finance but will also put greater discipline on corporates to pay their dues on time.

The RBI’s in-principle approval for TReDS is valid for a period of six months

As the TReDS will be a payment system authorised under the Payment and Settlement Systems Act 2007, RBI said an elaborate four-tiered structure of application processing was adopted for this purpose.

Source: Business Standard